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House Dem Kanjorski Unveils Plan to Regulate Size of Financial Firms

Source: WSJ

Posted on 18 Nov 2009

Rep. Paul Kanjorski (D-PA) unveiled his proposal on Wednesday to give regulators much more power to preemptively limit the size and scope of financial firms if it's determined a firm could put the broader economy at risk. The amendment is expected to see a vote in the House Financial Services Committee on Thursday, and big banks have lobbied aggressively against it without much success so far.

The nine-page amendment says a council of regulators should determine whether the size, scope, nature, scale, concentration, interconnectedness, or mix of activities “directly or indirectly” conducted by a company “poses a grave threat to the United States.” If such a threat is posed, the firm could face several different directives.

Regulators would be able to order the company to face tougher capital requirements, terminate certain business practices, limit certain business practices, and limit mergers. The company could also be forced to sell, divest, or transfer business units, assets, branches, or off-balance sheet activities.

The council of regulators must consult with the White House before ordering any directive, and companies will be able to appeal any order.